Adaro Energy 2011 Annual Report English
Annual Report 2011
NVEST IN
TO I
AD
NS
FU
ED
NEW
N
EDITIO
O
AR
12 RE
AS
O
Creating Maximum
Sustainable Value.
Building Winning Teams.
Bigger and Better
Adaro Energy.
T
L LY U P D A
EVERYTHING YOU NEED TO KNOW TO MAKE AN INFORMED INVESTMENT DECISION
Financial Highlights
(US$ millions)
Net Sales and EBITDA Margin
1,306 1,869
Net sales has experienced strong growth
the last ive years as we have increased
production and achieved better pricing.
EBITDA margin has been amongst the best
in Indonesian coal.
2,591
2,718
41.2%
3,987
36.9%
46.7%
32.5%
Increase in
Net Sales YoY
27.1%
17.2%
2007
2008
2009
2010
2011
506
1,067
883
1,472
EBITDA and Net Debt to EBITDA
225
Since 2007, EBITDA has grown signiicantly,
while net debt to EBITDA has improved,
demonstrating a healthy balance sheet.
66.7%
2.26x
1.33x
0.45x
2007
2008
2009
1.16x
1.05x
2010
2011
Increase in
EBITDA YoY
Free Cash Flow and Cash from Operations to Capex
154
Free cash low has remained positive and
strengthened the last ive years, comfortably
covering our capital expenditures.
352
960
638
847
32.9%
6.6x
4.6x
0.5x
2007
2008
Increase in
Free Cash Flow YoY
1.2x
1.1x
2009
2010
2011
417
247
552
Net Income and Dividend Payout Ratio
41
Net income reached a record level in 2011
and has experienced a robust increase
since 2007. We will continue to pay a
dividend each year to our shareholders.
96
123.7%
43.98%
42.54%
Increase in
Net Income YoY
21.24%
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Summary of Operational Performance
(in million tonnes)
Production volume
Sales volume
Overburden removal (Mbcm)
36.1
38.5
40.6
42.2
47.7
37.6
41.1
41.4
43.8
50.8
119.9
159.3
208.5
225.9
299.3
1,306
1,869
2,591
2,718
3,987
-1,032
-1,433
-1,534
-1,889
-2,559
1
Summary of Financial Performance
(in million US$)
Net revenue
Cost of revenue
Gross proit
Gross proit margin
274
436
1,057
829
1,428
21.0%
23.3%
40.8%
30.5%
35.8%
Operating income
247
360
951
711
1,284
Operating margin
18.9%
19.3%
36.7%
26.2%
32.2%
Net income
EBITDA
EBITDA margin
41
96
417
247
552
225
506
1,067
883
1,472
17.2%
27.1%
41.2%
32.5%
36.9%
Total assets
1,553
3,347
4,530
4,470
5,659
Total liabilities
1,264
1,824
2,648
2,438
3,217
Stockholders' equity
289
1,523
1,882
2,032
2,442
Interest bearing debt
780
993
1,676
1,592
2,105
88
221
1,199
607
559
184
100
-
-
-
Cash and cash equivalents
Available-for-sale investments
Net debt
508
672
477
985
1,546
Net debt to equity (x)
1.76
0.44
0.25
0.48
0.63
Net debt to EBITDA (x)
2.26
1.33
0.45
1.16
1.05
Free Cash Flow (EBITDA - Capex)
154
352
960
638
847
Cash from Operations to Capex (x)
Earnings Per Share (EPS) in US$
4.6
0.5
6.6
1.2
1.1
0.01500
0.00392
0.01297
0.00773
0.01721
1
We recorded our twentieth straight year of annual production growth as coal production increased 13%
to 47.7 million tonnes.
2
Strong revenue growth of 46.7% y-o-y due to double-digit production growth and robust thermal coal
pricing. Average selling price for Adaro climbed 27.6%.
3
Our record net income of US$552 million included contribution to the government for taxes and royalties
of US$450.5 million and US$405.4 million, respectively.
4
We maintained the best EBITDA margin in Indonesian thermal coal of 36.9%.
5
Strong balance sheet with net debt to EBITDA of 1.05x and access to cash and unutilized committed
bank facilities totalling US$1.2 billion.
2
3
4
5
Vision
TO BE A LEADING
INDONESIAN MINING AND
ENERGY GROUP
Mission
We are in the business of mining
and energy to:
• Satisfy our customers’ needs.
• Develop our people.
• Partner with our suppliers.
• Support the community and
national development.
• Promote a safe and sustainable
environment.
• Maximize shareholders’ value.
Annual Report Mission
To create a balanced and relevant picture of the
Company so as to keep our stakeholders informed.
2 Adaro Energy Annual Report 2011
www.adaro.com
Content
PT Adaro Energy Tbk
Annual Report 2011
A Snapshot of Adaro Energy
4
4 Map of Our Operations
6 Our Corporate Structure
8 Why Adaro?
Owning Adaro
144
144 Shareholders Information
148 Investor Relations
Governing Adaro
From Us to You
26
26 Letter from The Board of Commissioners
30 Letter from The Board of Directors
152
152 Status of Corporate Governance Practices
Financial Report
Running Adaro
35
35 Board of Commissioners
164
164 Financial Review
171 A Discussion with Mr. David Tendian
174 Consolidated Financial Statements
42 Board of Directors
52 Human Resources Management
Additional Information
60 A Discussion with Mr. Garibaldi Thohir
61 A Discussion with Mr. Christian Ariano Rachmat
62 Investing in Our Communities
269
269 Corporate Identity
270 Key Personnel and Business Units
272 Management’s Responsibility for
Annual Report 2011
Management Report
68
273 Glossary
68 Corporate Overview
87 A Discussion with Mr. M. Syah Indra Aman
88 Review of Coal Operations
98 A Discussion with Mr. Chia Ah Hoo
100 Our Subsidiaries
112 Occupational Health and Safety
116 Environmental Management
122 Exploration and Reserves
131 A Discussion with Mr. Sandiaga S. Uno
132 Investments for Future Performance
143 A Discussion with Mr. Andre J. Mamuaya
www.adaro.com
Adaro Energy Annual Report 2011
3
1
A Snapshot of Adaro Energy I Map of Our Operations
A Snapshot of Adaro Energy
PT Adaro Indonesia (AI)
Coal Contract of Work 100%
1
• Production: 47.7 Mt in 2011
• Product: Sub-bituminous Coal
(“Envirocoal”)
• License: First generation CCoW
valid until 2022
• JORC Compliant Resources and
Reserves 2010 adjusted for coal
mined in 2011:
Resources: 4,373 Mt
Reserves: 891Mt
• Operations: the largest single
site coal mine in the southern
hemisphere, vertically integrated
from pit to port
• Location: South Kalimantan
• Customers: blue-chip power utilities
• Pricing: annual price negotiation and
index-linked
• Cost: low to middle production cost
compared to peers
Adaro Logistics
Adaro Power
PT Saptaindra Sejati (SIS)
Mining and Hauling Contractor (100%)
1
PT Makmur Sejahtera Wisesa (MSW)
2 x 30 MW coal ired mine-mouth power
plant
1
PT Bhimasena Power Indonesia (BPI)
2 x 1,000 MW (34%)
2
PT Sejahtera Alam Energy (SAE)
Geothermal
3
South Kalimantan Power Project
2 x 100 MW (65%)
4
PT Maritim Barito Perkasa
Barging and Shiploading (100% )
1
PT Sarana Daya Mandiri (SDM)
Dredging Barito River mouth and
water toll contractor
2
PT Indonesia Bulk Terminal (IBT)
Coal and fuel Shipping Terminal (100%)
3
PT Servo Meda Sejahtera (SMS)
Coal Hauling Road (35%)
4
4 Adaro Energy Annual Report 2011
4
3
4
3
www.adaro.com
2
2
IndoMet Coal project
25% JV with BHP Billiton
•
•
•
•
3
PT Mustika Indah Permai (MIP)
Coal Lease 75%
• Product: Sub-bituminous Coal
(“Ultima”)
• License: IUP granted in April 2010
for a period of 20 years
• JORC Compliant Resources and
Reserves 2011
Resources: 286 Mt
Reserves: 273 Mt
• Location: South Sumatra
5
2
1
4
2 11
1
Product: Coking Coal
License: Third generation CCoW
Resources: 774 Mt
Location: Central Kalimantan
4
PT Bukit Enim Energi (BEE)
Coal Lease 61.04%
• Product: Sub-bituminous Coal
• License: IUP granted in March 2011
for a period of 20 years
• Further drilling and coal analysis
to support JORC compliant will be
resumed in 2012
• Location: South Sumatra
3
5
PT Bhakti Energi Persada (BEP)
Coal Lease 10.2%
• Product: Sub-bituminous Coal
• Location: East Kalimantan
LEGEND
Alam Tri Abadi
(Coal Mining)
www.adaro.com
Adaro
Power
Adaro
Logistics
Adaro Mining
Services
Adaro Energy Annual Report 2011
5
1
A Snapshot of Adaro Energy | Our Corporate Structure
Our Corporate Structure
Adaro Energy has vertically integrated operations
Alam Tri Abadi
100%
Adaro Indonesia
Mining
license holder
- Thermal Coal
25%
IndoMet Coal project
Mining
license holder
- Coking Coal
75%
Adaro Mining Services
Mustika Indah
Permai
Mining
license holder
- Thermal Coal
61.04% Bukit Enim Energi
100%
Saptaindra
Sejati
Adaro Logistics
100%
Jasapower
Indonesia
Conveyor
System
Mining and
hauling
contractor
100%
Maritim Barito
Perkasa
Barging and
ship loading
51.20% Sarana Daya Mandiri
Dredging Barito River
mouth and water toll
contractor
Mining
license holder
- Thermal Coal
6 Adaro Energy Annual Report 2011
www.adaro.com
from Coal Mining to Power Generation
Adaro Power
Adaro Marketing
100%
Indonesia Bulk
Terminal
Coal storage, blending,
loading terminal and fuel
facility
85%
Indonesia Multi
Purpose Terminal
100%
Coaltrade
Services Intl.
100%
2x30 MW
Mine-mouth Power Plant
Coal export
marketing
34%
35%
Haul Road and Barge
Loading Port
www.adaro.com
Bhimasena Power
Indonesia
IPP 2x1,000 MW
Port Terminal
Servo Meda
Sejahtera
Makmur Sejahtera
Wisesa
65%
2x100MW
Project South
Kalimantan
Adaro Energy Annual Report 2011
7
1
A Snapshot of Adaro Energy | Why Adaro
why
invest in
Adaro Energy
8 Adaro Energy Annual Report 2011
www.adaro.com
because...
1
Supportive Macro Conditions
2
Operational Excellence: Proven Track Record of Organic Growth
3
Large Resources and Reserves of Indonesian Coal with Secure License Structure
4
Focus on Indonesia
5
Approach to Growth and Value Creation
6
Execution of Value Creation Strategy
7
Responsible Corporate Citizen
8
Exceptional Safety Record
9
Financial Strength
10
Total Returns to Shareholders
11
Experienced Management Team and Our People
12
Reputable Shareholders and Our Approach to Governance
www.adaro.com
Adaro Energy Annual Report 2011
9
Supportive Macro
Conditions:
1
Exposure to Expand Emerging
Market and Attractive Thermal
Coal Industry
Coal is used to fuel more than two-thirds of power generation by China and India, who together are expected to
dominate 70% of the Asia Paciic market by 2030. Wood Mackenzie predicts Asia Paciic’s thermal coal demand to
grow at a CAGR of 4% for the foreseeable future and will continue to dominate the seaborne thermal coal trade.
Economic growth in non-OECD Asia countries acts as the main driver for energy demand as much of the increase in
non-OECD Asia’s demand for energy is driven by electricity generation and industrial sectors’ needs (IEO, 2011).
New coal-ired power plants totaling 579 GW are expected in the next 20 years in Asia, predominantly in China, India,
Vietnam and Indonesia. These projects will approximately require an additional 1.7 billion tonnes of coal per year.
Demand for Adaro Indonesia’s Coal Speciication is Expected to Grow Signiicantly
Robust industry fundamentals and outlook
strong demand for low CV coal
120
100
Mt
80
• Asia is expected to make up 76% of total global seaborne trade
in 2021 and contribute 82% of the growth from 2010 to 2021.
60
40
20
• India and China are expected to contribute over 50% of the
growth from 2010 to 2021 and together will take up to 33.5% of
total global seaborne demand, an increase from 23.6% in 2010.
21
20
20
19
20
18
20
17
20
16
20
15
20
14
20
13
20
12
20
11
20
10
20
20
20
09
0
Demand: 4,029 Kcal/kg
Demand: 5,105 Kcal/kg
Coal is a key source of generating electricity in target markets
India
China
Domestic coal consumption for
electricity generation
Source: Wood Mackenzie
10 Adaro Energy Annual Report 2011
Others
12,000
Source: Wood Mackenzie
2029
2027
2025
2028
2030
2024
2022
2020
2018
2016
2014
2012
2011
2010
2,000
0
2008
4,000
500
0
2023
6,000
1500
2021
TWh
8,000
2000
2006
2020
2019
2018
2016
2015
2014
2013
2012
2011
0
2010
20
Natural gas
Hydro
1,000
2004
40
Coal
14,000
2,500
2002
TWh
Mt
60
Gas
16,000
3,000
2000
80
Solid fuels
Hydro
2019
Other
renewable
fuel oil
2017
100
Nuclear
2015
Coal
2013
120
2010
Indonesia
Source: Wood Mackenzie Coal Market Service, Thermal Coal: Trends in
Global Markets, December 2011
www.adaro.com
Operational Excellence:
Proven Track Record of
Organic Growth
2
We recorded our twentieth straight year of uninterrupted annual production
growth from our concession in South Kalimantan, which is the largest
single site mine in the southern hemisphere. We take pride in having grown
production every year despite past economic crisis and dificult weather
conditions. Our operational excellence has assisted us in partnering with
several global blue-chip companies on projects.
In 2011, we increased coal production 13% to 47.7 million tonnes and
overburden removal 32% to 299.9 million bcm from three pits within our
concession; Tutupan, Wara, and Paringin. One of our key growth strategies
is continued focus on organic growth from our current reserve base. We
look to maintain our production track record as we seek organic growth
largely from our E4000 (Wara) coal.
47.7
34.4
20.8
13.6
15.5
22.5
24.3
1.0
1.4
1.0
1.0
2.1
5.4
12.9
1992
1993
1994
1995
1996
299.3
225.9
208.5
159.3
122.8 119.9
85.6
8.6
5.5
40.6 42.2
26.7
17.7
9.4 10.9
2.4
36.1
38.5
30,1
26.8
22.7
24.6
1997
1998
1999
2000
40.4
2001
48.2
56.1
2002
2003
66.0
2004
2005
2006
2007
2008
2009
2010
2011
Wara
Tutupan
Historical Production Volume (Mt)
Paringin
Overburden Removal (Mbcm)
Adaro has amongst
the lowest costs
in the coal mining
industry and
consistently
delivers the highest
EBITDA margin in
Indonesian coal.
www.adaro.com
Our Strategy to Improve Eficiency and Cost Control
Project
Reason
Project Cost
Spend Through
Q411
Completion
Date
Overburden crusher
conveyor
Transport 34 Mbcm overburden
annually
US$ 212 million
US$ 94 million
Q1 2013
Mine-mouth power
plant 2x30 MW
Power operations in South
Kalimantan and our overburden
crusher conveyor
US$ 160 million
US$ 110 million
Q4 2012
Kelanis
Expand our capacity to 70 Mt
from 55 Mt
US$ 55 million
US$ 20 million
Q4 2012
Increase truck size
Improve operating eficiency
and reduces pit congestion
NA
NA
Ongoing
Adaro Energy Annual Report 2011
11
Large Resources and
Reserves of Indonesian
Coal with Secure License
Structure
Adaro has a very large JORC compliant
resource and reserve base of 4.6
billion tonnes and 1.1 billion tonnes,
respectively. At Adaro Indonesia, we
hold a 1st generation Coal Contract
of Work (CCoW), which provides
us greater comfort in the dynamic
regulatory environment of natural
resources. Our CCoW, does not allow
for changes in our contract with the
government and is more secure than
subsequent license types. We pay a
45% tax rate and 13.5% of net sales in
royalty under a CCoW.
Currently, we sell two different
products from our concession in South
Kalimantan, which have heat values of
approximately 5,000 kcal/kg (E5000 Tutupan, Paringin) and 4,000 kcal/kg
(E4000 - Wara). Our coal is marketed
as Envirocoal and is one of the most
environmentally friendly coals with
extremely low ash, nitrogen, and sulfur
content.
Adaro Energy (Equity Adjusted) Consolidated JORC Compliant Coal Resources (*please refer to “Exploration and Reserves” section for the full disclosure)
1
2
3
4
Group
Operating
Company
Total
Adaro
Energy
PT. Adaro
Indonesia1,2
PT. Mustika
Indah Permai3
Calculated Changes
to Adaro Energy’s Coal
Resources 2011 vs 2010
Total
Measured,
Indicated
& Inferred
Coal
Resources
(Mt)
Measured
Coal
Resources
(Mt)
Indicated
Coal
Resources
(Mt)
Inferred
Coal
Resources
(Mt)
Total
Measured,
Indicated
& Inferred
Coal
Resources
(Mt)
Measured
Coal
Resources
(Mt)
Indicated
Coal
Resources
(Mt)
Inferred
Coal
Resources
(Mt)
Total
Measured,
Indicated &
Inferred Coal
Resources
2011 vs
2010 (Mt)
Total
Measured,
Indicated &
Inferred Coal
Resources
2011 vs
2010 (%)
4,588
1,651
1,437
1,499
4,426
1,517
1,410
1,499
162
3.7%
Based on Adaro Indonesia’s 2010 JORC Coal Resource and Reserve Statement adjusted by subtracting 53 Mt of in-situ coal removed by mining during 2011
1 Mt of in-situ coal was removed from North Paringin by mining in 2011
Based on the JORC Report of PT. Mustika Indah Permai (MIP) dated January 2012
Small differences between 2010 Resource tonnages in this table and those stated in the 2010 Adaro Energy Annual Report based on cumulative rounding errors
Adaro Energy (Equity Adjusted) Consolidated JORC Compliant Coal Reserves (*please refer to “Exploration and Reserves” section for the full disclosure)
As at December 31 20104
Calculated as at December 31 2011
Using A djusted 2011 Mine Production
& the December 2010 PT Adaro Indonesia
JORC Statement
1
2
3
4
Group
Operating
Company
Total
Adaro
Energy
Coal
Reserves
PT. Adaro
Indonesia1,2
PT. Mustika
Indah Permai3
Total
Proved &
Probable
Coal
Reserves
(Mt)
1,095
Probable
Proved
Coal Reserves Coal
Reserves
(Mt)
(Mt)
830
Calculated Changes to Adaro
Energy’s Coal Reserves
2011 vs 2010
Total
Proved &
Probable
Coal
Reserves
(Mt)
Proved
Coal
Reserves
(Mt)
Probable
Coal
Reserves
(Mt)
938
699
239
265
Total
Measured,
Indicated &
Inferred Coal
Reserves
2011 vs 2010
(Mt)
Total
Measured,
Indicated &
Inferred Coal
Reserves
2011 vs 2010
(%)
157
16.8%
Based on Adaro Indonesia’s 2010 JORC Coal Resource and Reserve Statement adjusted by subtracting 47 Mt of coal produced during 2011
No JORC Coal Reserves were declared for North Paringin in 2010 however 1 Mt of coal was mined in 2011
Based on the JORC Report of PT. Mustika Indah Permai (MIP) dated January 2012
Small differences between 2010 Reserve tonnages in this table and those stated in the 2010 Adaro Energy Annual Report based on cumulative rounding errors
20
30
15
Nitrogen % (daf)
ASH % (adb)
As at December 31 20104
Calculated as at December 31 2011
Using Adjusted 2011 Mine Production & the
December 2010 PT Adaro Indonesia JORC
Statement
10
5
envirocoal
30
2.5
2.0
1.5
1.0
envirocoal
0.5
0.0
Total Sulfur % (adb)
3
2.5
2.0
1.5
1.0
0.5
0.0
envirocoal
0
1% - 2.5%
0.9%
0.1%
Ash Content (Adb)
Nitrogen Content (Daf)
Sulphur Content (Adb)
• Lowest ash content among
coals produced for global export
trade, providing consumers with
signiicant cost savings
• Blending Envirocoal with higher
ash coal reduces the on-costs
associated with ash disposal
• Reduces deposition rates in boilers
improving thermal eficiency and
reducing maintenance costs
• Envirocoal is amongst the 10
lowest coals by nitrogen content
• Enables consumers to reduce the
costs associated with removing
nitrous oxides from the flue gases
• Results in more net power for sale
and lower electricity production
cost
12 Adaro Energy Annual Report 2011
• Regulation of emissions of
sulphur oxides has required some
consumers to install flue gas
desulphurization equipment or to
reduce the sulphur content in the
blend of coals.
• Envirocoal’s ultra low sulphur
content enables consumers to meet
regulated standards and delay
capital expenditure, reducing the
cost of plant operation.
• Desulphurization units can cost
up to 20% of the total capital
expenditure of a new power station
www.adaro.com
4
Focus on Indonesia
Resources: 75.03 Bt
Reserves: 13.22 Bt
Resources: 85.25 Bt
Reserves: 14.80 Bt
Indonesia is now recognized as an emerging market leader, with
2011 GDP growth of 6.54%. Furthermore, Indonesia is resource
rich and enjoys close proximity to those other emerging nations,
namely China, India and South Korea. Indonesia is the world’s
largest exporter of coal and the country’s coal production capacity
is estimated to reach 500 million tonnes by 2020, of which 50% is
low-rank coal (Wood Mackenzie, 2008).
Indonesian Coal
Resources: 160.65 (Bt)
Reserves: 28.02 (Bt)
7.8%
1.4%
24.1%
66.6%
www.adaro.com
Low Rank
Medium Rank
High Rank
Very High Rank
The rising demand for coal-ired power generation is also expected
to drive production growth of Indonesian low-rank coal. Much
like reforms to regulation, challenges exist. Growth targets for
installation of new generation capacity have slipped, so an objective
view should be taken when considering the numbers. Despite this,
PLN and private industry projects are under construction and coal
ired generation capacity is reported to double between 2011 and
2019 to 31.2GW.
With our performance in 2011 we moved one step closer to
achieving our vision to be a leading Indonesian energy and mining
company. We are proudly Indonesian and our focus is Indonesia.
Adaro Energy Annual Report 2011
13
5
Approach to Growth
and Value Creation
Action Plan
Growth Strategy
Organic growth from current
reserve base
Production ramp up and mine
planning
Majority of organic growth will
come from Wara mine
Focus on improving eficiency
of coal supply chain and cost
control
Implementation of OPCC,
mine-mouth power plant and
control of barge cycle time
Chip sealing of hauling road,
dredging of channel etc
have been initiatives in past
that brought down costs
substantially
Increase reserves, diversify
product, locations and
licenses
Acquisition of large coal
deposits at different locations
in Kalimantan and Sumatra
islands
Acquired concessions in
South Sumatra, more in due
diligence. Partnering with
BHP on Coking Coal
Investment into IPPs
First Indonesian company
to participate in IPPs in a
signiicant way. Partnering
with reputable global players
in IPP sector
Continue to deepen
integration
Adaro Energy continues to focus on creating maximum sustainable value from Indonesia coal.
However, our strategy has shifted from not only developing a single site concession in South
Kalimantan, but also incorporating acquisitions of coal deposits in Indonesia into our growth plan
to reach 80 million tonnes of production in the medium term.
We will continue to develop infrastructure and improve our coal supply chain to realize eficiencies
and strengthen our distinctive position in the market. Moreover, we have further integrated our
coal supply chain by moving downstream into power.
Our approach to value creation can be summarized by four key strategies; organic growth from the
current reserve base, improving the eficiency of our coal supply chain, increasing and diversifying
reserves, products and locations and deepening integration.
14 Adaro Energy Annual Report 2011
www.adaro.com
Execution of
Value Creation
Strategy
6
We are executing on our value creation strategy. We have made investments in a number
of infrastructure development projects that are on track and progressing well, further
improving eficiency and lowering costs. We also acquired interests in two coal deposits
and one logistic company in South Sumatra to diversify our operations and increase
reserves.
We deepened integration by moving further downstream into power and establishing the
JPower-Adaro-Itochu consortium to build a 2,000 MW coal-ired power station in Central
Java, which will be one of the largest in Asia.
Acquisition
Price/ Ownership Date
Location
Asset
License /
Expiry
Expected
Operation
IndoMet Coal (IMC)
JV with BHP
US$335m
25%
March
2010
Central
Kalimantan
Greenield coking coal
CCoW
NA
TBA
Mustika Indah Permai
(MIP)
US$222.5m
75%
August
2011
South Sumatra
Greenield thermal coal
IUP
2030
2012
Bukit Enim Energi
(BEE)
US$67m
61%
October
2011
South Sumatra
Greenield thermal coal
IUP
2031
TBA
Servo Meda Sejahtera US$22m
(SMS)
35%
October
2011
South Sumatra
Logistics - haul
road and port
NA
2012
Bhakti Energi Persada US$66m
(BEP)
10%
June
2011
East Kalimantan
Greenield thermal coal
IUP
NA
TBA
www.adaro.com
Adaro Energy Annual Report 2011
15
7
Responsible Corporate
Citizen
By championing the principles of mutual respect, partnership,
long-term and sustainable commitment, Adaro’s Corporate
Social Responsibility (CSR) programs encompass four key
areas, economic development, educational enhancement, health
improvement, and social cultural promotion.
The aim is to support the enhancement of community welfare that
will ultimately lead to the creation of sustainable and independent
•
•
Record contribution to nation
with corporate income tax of
US$450.5 million and royalties of
US$405.4 million
We increased community
development spending by 70%
to US$10 million
16 Adaro Energy Annual Report 2011
post-mine communities.
We also attempt to preserve the environment, create a productive
community and be a good local partner through all our programs.
In 2011, Adaro Energy and its subsidiaries allocated Rp91 billion
(~US$10 million) for these programs.
www.adaro.com
Exceptional
Safety Record
and Training
8
Adaro Energy is committed to maximizing workplace
safety in all its operations to achieve its vision of being a
leading Indonesian mining and energy group. We strive to
create a safe working environment so that our employees
can go home safe and healthy at the end of each day.
We require our employees and contractors to have the
knowledge, skills and desire to comply with national and
international standards of occupational health and safety
to minimize risk of accidents and injuries occurring from
operations. We also have a number of initiatives to help
achieve our goals of eliminating work place accidents.
Production
vs Injury
2007 - 2011
47.7
42.2
36.1
0.69
38.5
40.6
0.65
0.50
0.36
0.38
PRODUCTION (mt)
LTIFR
2007
www.adaro.com
2008
2009
2010
2011
Adaro Energy Annual Report 2011
17
Financial Strength:
9
Good Access to Capital, Healthy
Balance Sheet, Robust Proitability
and Strong Cash Generation
Net Sales (in US$ mn)
& Operating Margin
1,306
1,869
EBITDA (in US$ mn)
& Net Debt to EBITDA
2,591
2,718
36.7%
18.9%
19.3%
2007
2008
2.26x
32.2%
26.2%
2009
225
3,987
352
2010
960
1,067
1.33x
0.45x
2007
2011
Free Cash Flow (in US$ mn)
& Cash from Operations to Capex
154
506
638
2008
2009
41
847
96
6.6x
417
1.2x
1.1x
2010
2011
0.5x
2009
1.05x
2010
2011
• US$400 million 7 year,
concluded with 12
banks. Undrawn $100
million.
247
32.5%
2007
2008
2009
94%
2010
97%
60%
21%
21
8%
40
36
100
2012
1
5
3
49%
15
54%
800
230
4
34
5
32
45
4
552
36.9%
• US$750 million 10 year
bank loans club deals
with key relationship
banks. Undrawn $600
million.
43
100
100
87.5
38
56
2013
2014
2015
2016
2011
100%
2019 Bond
Amortizing
RCF
USD Syndicated Loan
Facility
Finance
Leases
New 10yr US$ Term
Loan
USD Senior Credit Facility
(SIS)
OCBC NISP Tbk Facility
(SDM)
45%
19
150
• US$800 million 10 year,
non call 5, Reg S/144A,
Guaranteed Senior
Notes Currently rated
at Ba1 and BB+ from
Moody’s and Fitch.
17.2%
Debt Maturity Proile in 2012
38%
24
1,472
1.16x
41.2%
27.1%
2008
883
Net income (in US$ mn)
& EBITDA Margin
4.6x
2007
Exceptional
Access to Capital
Cumulative % of Total
Debt
35
71
94
2017
2018
2019
60
68
2020
2021
A large group of relationship banks and bond holders continue to be very supportive of Adaro.
At end of December 2011, Adaro Energy had approximately $700 million undrawn facilities
Key Lenders to the Group
18 Adaro Energy Annual Report 2011
www.adaro.com
Total Returns to
Shareholders
10
210.9%
202.7%
193.7%
68.1%
Jakmine
Index
283.0%
Adaro
JCI
Index
ICB Subsector
(Coal)
Bloomberg
Asia Pac
Mining
Over the last three years, Adaro has returned
signiicant shareholders return for those
investors who have held our stock during
this time frame. As mining is not a short-term
business, our focus is to create long-term value
for all of our shareholders who support us as
we seek to create maximum sustainable value
from Indonesian coal. Adaro will consistently
pay a cash dividend each year; however, our
main use of cash will be to invest in the growth
of our business.
3-year Stock Performance
Security
Price Appreciation
Total Return
CAGR
ADRO IJ Equity
264.95%
282.95%
56.45%
JCI Index
181.98%
202.73%
44.66%
JAKMINE Index
188.53%
210.88%
45.95%
ICB Subsector (Coal)
167.49%
193.65%
43.20%
Bloomberg Asia Pac Mining
58.49%
68.13%
18.91%
Fiscal Year
Dividend Payout Ratio
Dividend Per Share (IDR)
Dividend Yield*
2010
43.98%
30.35
1.47%
2009
21.24%
29.00
2.41%
2008
42.54%
11.80
1.12%
Adaro Energy’s Dividend
* Dividend yield is calculated by dividing dividend per share by average stock price for associated iscal year
Source: Bloomberg and Company estimates
www.adaro.com
Adaro Energy Annual Report 2011
19
11
Experienced
Management Team
and Our People
Leadership continuity is key to successful execution
of Adaro Energy’s strategy and navigating through
challenging times
Experienced Management
Team with Proven Track
Record
Production (Mt)
79%
Sales (US$ mn)
482%
47.7
3,987
26.7
2005*
2011
Proit Before Tax (US$ mn)
More than
135 years
of combined
industry
experience
697
2005*
Net Debt/EBITDA
6.3x
1094%
(83)%
1,003
84
2005*
2011
2011
Combined 75
years with Adaro
Energy
Mine Life (Years)
1.0x
2005*
2011
Lost Time Injury Frequency Rate
11%
1.32
(68)%
18.7
16.9
Average 12
years with Adaro
Energy
2005*
2011
0.42
2005*
2011
* Represents PT Adaro Indonesia only
•
•
•
•
Beneits from experience and active participation of key shareholders
High operating and safety standards
Prudent inancial policies
Strong corporate governance and regulatory compliance
20 Adaro Energy Annual Report 2011
www.adaro.com
Reputable Shareholders
and Our Approach to
Governance
12
Reputable and Supportive
Shareholders
Edwin Soeryadjaya
Teddy Rachmat
Boy Garibaldi Thohir
Benny Subianto
Sandiaga Uno
} 63%
together hold
Strong Corporate Governance Structure
In-line with International Best Practices
•
•
•
•
1/3 of Board of Commissioners are independent commissioners
Audit Committee consists of 3 independent members
Conduct regular internal audit of operations
Disclosure meets or exceeds with international standards
Wide Recognition Across
the Board
•
•
•
•
•
•
•
www.adaro.com
Top Performing Listed Companies 2010 by Investor Magazine
International Coal Producer of the Year by McCloskey
3rd Fastest Growing Company in Asia by Platts
One of highest tax payers on Jakarta Stock Exchange in 2008
and 2009
PROPER Green Award for the 3rd consecutive time from Ministry
of Environment
Only coal company to ever receive the PROPER Green Award
Best CEO in Mining 2010 by Ministry of Energy and Mineral
Resources
Adaro Energy Annual Report 2011
21
1
A Snapshot of Adaro Energy
Share price (Rp)
2011 Important Dates and Share Price Information
3,000
2,675
2,500
1
4
2
1
3
2,000
4
5
Adaro Energy
HSBC Global Mining Index
Bloomberg Coal Index
1,500
BBG World Coal Index
Jakarta Mining Index
1,000
500
0
Jan
Feb
Mar
Apr
Jun
Q2
Q1
1
May
2
3
February 18th 2011
March 5th 2011
April 20th 2011
PT Saptaindra Sejati (SIS) refinanced its existing
2008 US$300 million five-year loan with a
US$400 million seven-year syndicated bank loan.
Adaro Energy on the Forbes Global 2000 list at
#1,527.
Adaro held its Annual General Meeting of
Shareholders (AGMS) and Extraordinary General
Meeting of Shareholders (EGMS) and distributed
its final dividend payment constituting 43.98% of
2010 Net Income, or amounting Rp970.77 billion.
7
September 30th 2011
8
October 6th 2011
The JPower-Adaro-Itochu Consortium received
We received Aditama (gold) award 2011 for
Letter of Intent (LoI) to construct a 2,000MW coalenvironmental management excellence in coal
sector from the Director General Mineral and Coal, fired power plant in Central Java province.
Mr. Thamrin Sihite.
22 Adaro Energy Annual Report 2011
9
October 10th 2011
PT Alam Tri Abadi (ATA), a wholly owned
subsidiary of PT Adaro Energy, signed a deed of
transfer shares to acquire a 35% interest in PT
Servo Meda Sejahtera (SMS) for Rp200 billion
from PT Servo Infrastruktur (SI).
www.adaro.com
Jul
2011 Important Dates and Share Price Information
Bumi, Adaro to help Indonesia Coal Output Rise 71% , WoodMac Says
2
Adaro to Buy Majority Stake in Bhakti Energi Persada This Year
3
Indonesia May Increase Coal Production 8,3 Percent in 2012
4
Adaro Indonesia Gets 10 Years, $750 Million Bank - Loan Agreement
5
Adaro, Bumi Advance as a UBS Forecasts China Coal Imports to Rise
5
6
11
9 10
300,000
10
250,000
0
200,000
-10
150,000
-20
12
8
2
Return (%)
1
Volume (000)
Most Read Adaro News on Bloomberg:
1,770
100,000
-30
50,000
-40
1000
-50
7
3
0
Aug
Sep
Oct
Q3
Nov
Q4
5
4
Dec
6
May 31st 2011
July 4th 2011
August 19th 2011
Adaro, Komatsu and United Tractors launched Bio
Diesel Fuel Pilot project in Indonesia to achieve
sustainable environmentally friendly mining
operations in our mining operations.
PT Adaro Indonesia closed a US$750 million 10year unsecured loan facility from our relationship
banks, after previously receiving US$1 billion
commitment for this 10-year bank loan.
PT Alam Tri Abadi (ATA), a wholly owned
subsidiary of PT Adaro Energy, signed a share
purchase agreement to acquire a 75% stake of
PT Mustika Indah Permai (MIP) for US$222.5
million (post tax US$ 234.2 million) from Elite Rich
Investment Limited.
10
11
12
October 14th 2011
November 30th 2011
December 9th 2011
PT Alam Tri Abadi (ATA), a wholly owned
subsidiary of PT Adaro Energy, signed a deed of
transfer shares to acquire 46% interest in PT Bukit
Enim Energi (BEE) for US$46 million from Lucky
Star Corporation, Oriental Holdings Ltd., and
BrightPath Corporation. The group owns 61.04%
of BEE.
We received PROPER Award with Green Rating
for the fourth consecutive year from the Ministry
of Environment of Republic Indonesia, Prof. Dr.
Balthasar Kambuaya.
We delivered our first shipment of E4000 (Wara)
coal to Hong Kong Electric Company Limited
(HKE), HK.
www.adaro.com
Adaro Energy Annual Report 2011
23
1
A Snapshot of Adaro Energy | Map of Our Operations
Map of Existing Operations
2
4
3
1
5
6
7
24 Adaro Energy Annual Report 2011
8
www.Adaro.com
www.adaro.com
1
PT Adaro Indonesia,
Mining
2
PT Saptaindra Sejati (“SIS”),
Contract Mining
Production Volume:
47.7 million tonnes (13% increase y-o-y)
Coal Sales including from Coaltrade:
50.8 million tonnes (16% increase y-o-y)
Overburden Removal:
299.27 Mbcm (32% increase y-o-y)
Planned Strip Ratio: 5.9x (2010: 5.5x)
Coal type: Envirocoal, sub-bituminous,
medium caloriic value, ultra-low
pollutants
3
Hauling Road:
100% Owned by Adaro Indonesia
Total Coal Production:
22.7 million tonnes (37% increase y-o-y)
Total Overburden Removal:
167.5 Mbcm (31% increase y-o-y)
4
Kelanis: One of the World’s
Largest Inland River Bulk Terminals
Hauling Equipment Capacity:
60 million tonnes a year
Hauling Road Capacity:
80 million tonnes a year
Hauling Road Distance:
80 kilometers
Vehicles: 200 road trains
FY11 Contractors:
PAMA 35%, SIS 32%, BUMA 18%,
RAJ 13%, Adaro Indonesia 2%
5
PT Maritim Barito Perkasa (“MBP”)
Barging
Crushing Capacity:
in excess of 50 million tonnes a year
- 7 crushers with total capacity of 7,500
tonnes per hour
Stockpiling Capacity:
2 stockpiles with capacity of 250,000 tonnes
each
Barge Loading Capacity:
2 load out conveyor systems each rated at
5,000 tonnes per hour
Crushing, stockpiling and barge
loading facilities at Kelanis can easily
be upgraded
6
PT Maritim Barito Perkasa (“MBP”)
Shiploading
8
Total Coal Loaded:
13.6 million tonnes
(8% increase y-o-y)
Total Dedicated Capacity:
60,000 tonnes per day
MBP Floating Cranes:
4, each with 15,000 tonnes per day
capacity
PT Indonesia Bulk Terminal (“IBT”)
Coal Terminal Services
Total Coal shipped:
4.4 million tonnes (30% decrease y-o-y)
Number of vessels loaded: 65
Stockpile:
Up to 800,000 tonnes of coal
Capacity:
12 million tonnes coal per year, fuel tank
capacity of 80,000 kilolitres
Facilities:
2 large berths for 2 barges of up to
15,000 tonnes
Coaltrade
Services
International
Pte Ltd
Marketing
www.Adaro.com
Sea Channel Operator
Total Transit Volume: 79 million tonnes
Capacity:
200 million tonnes per year (previously 60
million tonnes per year)
Total barge steaming time along the
channel: reduced by 3 hours
Channel Speciications:
Length: 15,000 meters (old: 14,000 meters)
Base width: 138 meters (old: 60 meters)
Depth: 6 meters LSW (old: 3 meters LSW)
Total Coal Barged:
15.8 million tonnes
(36% increase y-o-y)
Barging Distance:
250 kilometers (estimated travel time
–24 hours)
MBP/HBI Fleet:
24 barges and 25 tugboats
Self-propelled Barges:
Four units of self-propelled barges with
capacity of 12,000 dwt - 15,000 dwt
7
PT Sarana Daya Mandiri (“SDM”)
Principal activities are trading of thermal coal,
acting as agents for both coal producers and
customers.
Total third party coal sales of 3.6 million tonnes.
Adaro Energy Annual Report 2011
25
2
From Us to You | Letter from the Board of Commissioners
Edwin Soeryadjaya
President Commissioner
Dear Shareholders,
Adaro Energy achieved a historical milestone in
2011 as we reached 20 years of uninterrupted
production growth and record inancial results
in the midst of a challenging global situation. We
are continuously striving to grow and diversify our
products and operations and are further enhancing
our coal supply chain downstream into the power
sector, enabling us to reach our overall long term
goal of creating maximum sustainable value from
Indonesian coal by building a bigger and better
Adaro.
Year End Results
Letter From the
Board of Commissioners
“
As a publicly listed mining and
energy company, good corporate
governance goes hand-in-hand with
our Corporate Social Responsibility
(CSR). Our commitment to support
the local communities and preserve
the environment, in which we operate,
has been demonstrated in the past
and continues to deine our business
practices.
26 Adaro Energy Annual Report 2011
We are pleased with our strong 2011 operational
and inancial performance. Our achievements
were possible due to normal weather conditions
throughout the year, the arrival of new and larger
sized heavy equipment and quality performance by
our mining contractors. We produced 47.7 million
tonnes of coal and had sales volumes of 50.8
million tonnes, increasing year over year by 13%
and 16%, respectively. Due to higher mining costs,
resulting from a higher stripping ratio and longer
overburden hauling distances, Adaro Energy’s
costs of revenue increased 35% to US$2.56 billion.
However, we sustained a robust EBITDA (earning
before interest taxes depreciation and amortization)
of US$1.47 billion, increasing 66.7% from last
year, and amongst the best EBITDA margins in
Indonesian coal of 37%.
Adaro is currently Indonesia’s second largest
thermal coal producer in terms of tonnage, operates
the largest single coal mine-site in Indonesia, and is
a signiicant supplier of thermal coal to the global
seaborne market. Adaro is vertically integrated,
either directly or indirectly, and controls all aspects
of its business from exploration to marketing. With
a present production of approximately 48 million
tonnes per year, we are executing plans to boost
production to 80 million tonnes per year in the
medium term. Adaro has approximately 4.6 billion
tonnes of coal resources and 1.1 billion tonnes
of reserves based on JORC studies completed in
www.adaro.com
2011 and 2012 adjusted by 2011 Adaro Indonesia
coal production.
Our operations at Adaro Indonesia’s Wara pit will
be the key organic growth driver in order to achieve
our medium term production goal. In 2011, E4000
(Wara) contributed 5.4 million tonnes to total
production. Going forward, we expect production
at Wara will increase supported by strong demand
from developing Asia.
Projects and Business Development
Progress
We continue to develop infrastructure and improve
our coal supply chain to realize eficiencies and
strengthen our distinctive position in the market.
Moreover, we have further integrated our coal
supply chain by moving downstream into power
as well as diversifying our product offerings and
increasing our reserve base through acquisitions of
coal deposits in Indonesia.
2x30 MW Coal-ired Mine-mouth Power Plant
Adaro Energy’s 2x30 MW coal-ired mine-mouth
power plant aims to reduce our dependency on
oil by powering our overburden crushing and
conveying system, which will reduce overburden
truck hauling, in addition to providing power to
other parts of our mining operations. The plant
is owned and will be operated by our subsidiary,
PT Makmur Sejahtera Wisesa (MSW), with a total
estimated cost of US$160 million. At year end
2011, the total spending on this project reached
US$111.8 million. The plant will be fuelled by
approximately 300,000 tonnes of E4000 coal per
year. The physical progress of the plant is on track
and is expected to be in full operation in late 2012.
Overburden Crushing and Conveying System
The out of pit overburden crushing and conveying
system is currently being installed. The system will
reduce the cost of transporting the overburden
material to the dump location, decreasing
dependency on the use of diesel. It has a capacity
to crush and transport 12,000 tonnes per hour of
overburden material equivalent to approximately
34 million bank cubic meters (Mbcm) annually. The
project is projected to cost in excess of US$212
million with an expected reduction in operating
costs by US$1.00-US$1.20 per bcm compared to
the existing use of trucking. The total spending at
year end 2011 was US$94.7 million and the project
is expected to commence commercial operation in
2013.
www.adaro.com
Expanding Capacity at Kelanis River Terminal
Our coal crushing, stockpiling and barge loading
facilities are located at the Kelanis river terminal
with a capacity of 55 million tonnes per year. The
upgrade of the existing Kelanis facilities to more
than 70 million tonnes per year by the end of
2012 is underway and progressing well. The total
estimated cost for this project is US$55 million.
Our plan includes upgrading and replacing existing
hoppers, upgrading existing as well as adding new
conveyor belts, and adding two new barge loading
conveyors.
IndoMet Coal project with BHP Billiton
Further studies to identify development options
across the seven Coal Contracts of Work (CCoWs)
of the IndoMet Coal (IMC) project continued
towards the end of 2011. In the IndoMet Coal
project, Adaro has an interest of 25% and the
remaining 75% is owned by BHP Billiton. Adaro is
delighted to have this project together with BHP
Billiton, a global leader in the resources industry
and the world’s largest coking coal producer, in
developing this world class asset, which we expect
will create signiicant shareholder value.
JPower-Adaro-Itochu Consortium Signed a
PPA for a 2,000 MW Central Java Power Plant
Project
In early October, PT Bhimasena Power Indonesia
(BPI), a company established by the JPowerAdaro-Itochu consortium, signed a Power
Purchase Agreement (PPA) with PT PLN (Persero)
for the 2,000 MW Central Java Power Plant (CJPP)
project with a total project cost of approximately
US$4 billion. The PPA includes the construction of
the power plant and a 25-year supply of electricity
to PLN. The Government of the Republic of
Indonesia (represented by the Ministry of Finance),
Indonesia Infrastructure Guarantee Fund (IIGF) and
BPI also will guarantee PLN’s payment obligation
for the CJPP project under the PPA. This is the
irst formalized public-private partnership (PPP) in
Indonesia under a guarantee provided by the IIGF
and part of the Master Plan for Acceleration and
Expansion of Indonesian Economic Development.
This power plant is the irst in Indonesia to use
advanced environmentally friendly, technology
and will serve as a model of high-eficiency power
generation. The power plant will utilize Indonesian
sub-bituminous coal as fuel, with Adaro Indonesia
as the primary coal supplier. The construction is
expected to commence in 2012 with commercial
operations by 2016-2017.
Adaro Energy Annual Report 2011
27
2
From Us to You | Letter from the Board of Commissioners
In moving downstream to the power sector,
we have reviewed several Independent Power
Producer (IPP) projects located in Indonesia and
will continue to do so.
Acquisitions of Coal Mines and Logistics
Company in South Sumatra
As part of our efforts to increase our reserves, Adaro
Energy continues to look for potential acquisitions
of coal deposits in Indonesia employing three
selection criteria namely size, location, and quality.
In 2011, we acquired two greenield coal projects in
South Sumatra and one logistics company. In midAugust, we purchased a 75% stake in PT Mustika
Indah Permai (MIP) for US$222.5 million (post tax
US$234.2 million). MIP holds an IUP permit which
was granted in April 2010 for a period of twenty
years and covers an area of approximately 2,000
hectares. As of December 15th, 2011, the total
JORC Compliant Coal Resources for MIP were
286 million tonnes, of which 273 million tonnes are
JORC Compliant Coal Reserves with an average
caloriic value of 4,281 kcal/kg (GAR).
In early October, Adaro acquired a 35% interest
in PT Servo Meda Sejahtera (SMS) for Rp200
billion. We carried out this transaction to support
and develop our coal logistics operations in the
South Sumatra Province. SMS is constructing a
dedicated haul road and common user coal port,
which will provide coal hauling and barge loading
services in South Sumatra.
In mid-October, Adaro Energy bought an additional
46% stake for US$46 million to become the
majority shareholder in PT Bukit Enim Energi (BEE)
with a 61.04% stake in total. BEE is a coal mining
company developing a greenield coal project in
South Sumatra. BEE holds an IUP permit which was
granted in March 2011 for a period of twenty years
which covers an area of 11,130 hectares. Marston,
an international mining consultant, carried out
engineering studies of the coal potential of the MIP
and BEE mines, on which the valuation was based.
Additional drilling and coal analysis are required
before a JORC compliant statement of Resources
and Reserves can be issued for BEE in 2013.
These acquisitions are part of Adaro’s strategic plan
to continuously grow and develop both organically
and inorganically, creating maximum value from
Indonesian coal.
28 Adaro Energy Annual Report 2011
Corporate Social Responsibillity And
Community Development
As a publicly listed mining and energy company,
good corporate governance goes hand-in-hand
with our Corporate Social Responsibility (CSR). Our
commitment to support the local communities and
preserve the environment, in which we operate,
has been demonstrated in the past and continues
to deine our business practices.
Our CSR programs have become embedded
in every activity we do, particularly in our mine
site. In addition, Adaro employs the Millenium
Development Goals as guidance in implementing
our community development programs. We realize
that we must not only bring temporary beneits to
our surroundings but also sustainable beneits that
contribute to the establishment of an independent
society based on a harmonic relationship with the
natural environment. In fact, we are in the process
of developing a mining closure model to ensure we
achieve sustainable community development.
Aside from our extensive community programs,
Adaro applies strict standards on all phases of its
operations through an Environmental Policy and
Master Plan to ensure that negative impacts are
minimized. Land affected by mining is reclaimed
beyond what is required by the regulations. The
reclamation encompasses planting of commercial
crops, creating ish and shrimp farms, and
developing other usages. We continuously monitor
air and water quality as well as implement strict
programs for air, water and waste handling.
Our efforts and commitment in applying best
environmental practices have earned us
recognitions. We are delighted to have received
the PROPER Green award for four consecutive
years from the Ministry of Environment for social
programs and environmental rehabilitation. In
addition, we received a total of nine awards for
our CSR programs in community health, education
and economic development from the Ministry of
Social Affairs, the Coordinating Ministry of People’s
Welfare and Enterprise Asia.
Corporate Governance and Compliance
We meet the various requirements of the capital
market and exchange regulatory authorities;
however, we still continuously seek to improve and
develop our corporate governance structure in-line
with best practices.
www.adaro.com
The Board of Commissioners oversees all major
aspects of the management of Adaro through
routine and ad-hoc board meetings, as well as
the activities of the Audit Committee. We have
made great progress aligning our best practices
and standards with the goals, mission and vision
of Adaro Energy; yet, we strive to continuously
improve our corporate governance. Our efforts
and commitment have gained recognition as we
achieved several awards from both international
and domestic institutions. We received an award
from Corporate Governance Asia, an international
institution, while domestically we received an
award for the Most Improved Governance from
the Indonesian Institute for Corporate Directorship
(IICD) and an award as Indonesia Trusted
Companies based on Investor and Analysts’
Assessment Survey from the Indonesian Institute
for Corporate Governance (IICG).
We believe that strong corporate governance is not
only a set of procedures and policies to comply
with the regulations, but also applies to corporate
governance of all our activities and businesses and
is a perpetual system that ensures the interests of
stakeholders and the sustainability of the company.
Dividend Distributions
The 2011 Annual General Meeting of Shareholders,
which was conducted on April 20th, 2011, approved
the use of 43.98% net proit for the iscal year 2010
inal dividend payment
NVEST IN
TO I
AD
NS
FU
ED
NEW
N
EDITIO
O
AR
12 RE
AS
O
Creating Maximum
Sustainable Value.
Building Winning Teams.
Bigger and Better
Adaro Energy.
T
L LY U P D A
EVERYTHING YOU NEED TO KNOW TO MAKE AN INFORMED INVESTMENT DECISION
Financial Highlights
(US$ millions)
Net Sales and EBITDA Margin
1,306 1,869
Net sales has experienced strong growth
the last ive years as we have increased
production and achieved better pricing.
EBITDA margin has been amongst the best
in Indonesian coal.
2,591
2,718
41.2%
3,987
36.9%
46.7%
32.5%
Increase in
Net Sales YoY
27.1%
17.2%
2007
2008
2009
2010
2011
506
1,067
883
1,472
EBITDA and Net Debt to EBITDA
225
Since 2007, EBITDA has grown signiicantly,
while net debt to EBITDA has improved,
demonstrating a healthy balance sheet.
66.7%
2.26x
1.33x
0.45x
2007
2008
2009
1.16x
1.05x
2010
2011
Increase in
EBITDA YoY
Free Cash Flow and Cash from Operations to Capex
154
Free cash low has remained positive and
strengthened the last ive years, comfortably
covering our capital expenditures.
352
960
638
847
32.9%
6.6x
4.6x
0.5x
2007
2008
Increase in
Free Cash Flow YoY
1.2x
1.1x
2009
2010
2011
417
247
552
Net Income and Dividend Payout Ratio
41
Net income reached a record level in 2011
and has experienced a robust increase
since 2007. We will continue to pay a
dividend each year to our shareholders.
96
123.7%
43.98%
42.54%
Increase in
Net Income YoY
21.24%
2007
2008
2009
2010
2011
2007
2008
2009
2010
2011
Summary of Operational Performance
(in million tonnes)
Production volume
Sales volume
Overburden removal (Mbcm)
36.1
38.5
40.6
42.2
47.7
37.6
41.1
41.4
43.8
50.8
119.9
159.3
208.5
225.9
299.3
1,306
1,869
2,591
2,718
3,987
-1,032
-1,433
-1,534
-1,889
-2,559
1
Summary of Financial Performance
(in million US$)
Net revenue
Cost of revenue
Gross proit
Gross proit margin
274
436
1,057
829
1,428
21.0%
23.3%
40.8%
30.5%
35.8%
Operating income
247
360
951
711
1,284
Operating margin
18.9%
19.3%
36.7%
26.2%
32.2%
Net income
EBITDA
EBITDA margin
41
96
417
247
552
225
506
1,067
883
1,472
17.2%
27.1%
41.2%
32.5%
36.9%
Total assets
1,553
3,347
4,530
4,470
5,659
Total liabilities
1,264
1,824
2,648
2,438
3,217
Stockholders' equity
289
1,523
1,882
2,032
2,442
Interest bearing debt
780
993
1,676
1,592
2,105
88
221
1,199
607
559
184
100
-
-
-
Cash and cash equivalents
Available-for-sale investments
Net debt
508
672
477
985
1,546
Net debt to equity (x)
1.76
0.44
0.25
0.48
0.63
Net debt to EBITDA (x)
2.26
1.33
0.45
1.16
1.05
Free Cash Flow (EBITDA - Capex)
154
352
960
638
847
Cash from Operations to Capex (x)
Earnings Per Share (EPS) in US$
4.6
0.5
6.6
1.2
1.1
0.01500
0.00392
0.01297
0.00773
0.01721
1
We recorded our twentieth straight year of annual production growth as coal production increased 13%
to 47.7 million tonnes.
2
Strong revenue growth of 46.7% y-o-y due to double-digit production growth and robust thermal coal
pricing. Average selling price for Adaro climbed 27.6%.
3
Our record net income of US$552 million included contribution to the government for taxes and royalties
of US$450.5 million and US$405.4 million, respectively.
4
We maintained the best EBITDA margin in Indonesian thermal coal of 36.9%.
5
Strong balance sheet with net debt to EBITDA of 1.05x and access to cash and unutilized committed
bank facilities totalling US$1.2 billion.
2
3
4
5
Vision
TO BE A LEADING
INDONESIAN MINING AND
ENERGY GROUP
Mission
We are in the business of mining
and energy to:
• Satisfy our customers’ needs.
• Develop our people.
• Partner with our suppliers.
• Support the community and
national development.
• Promote a safe and sustainable
environment.
• Maximize shareholders’ value.
Annual Report Mission
To create a balanced and relevant picture of the
Company so as to keep our stakeholders informed.
2 Adaro Energy Annual Report 2011
www.adaro.com
Content
PT Adaro Energy Tbk
Annual Report 2011
A Snapshot of Adaro Energy
4
4 Map of Our Operations
6 Our Corporate Structure
8 Why Adaro?
Owning Adaro
144
144 Shareholders Information
148 Investor Relations
Governing Adaro
From Us to You
26
26 Letter from The Board of Commissioners
30 Letter from The Board of Directors
152
152 Status of Corporate Governance Practices
Financial Report
Running Adaro
35
35 Board of Commissioners
164
164 Financial Review
171 A Discussion with Mr. David Tendian
174 Consolidated Financial Statements
42 Board of Directors
52 Human Resources Management
Additional Information
60 A Discussion with Mr. Garibaldi Thohir
61 A Discussion with Mr. Christian Ariano Rachmat
62 Investing in Our Communities
269
269 Corporate Identity
270 Key Personnel and Business Units
272 Management’s Responsibility for
Annual Report 2011
Management Report
68
273 Glossary
68 Corporate Overview
87 A Discussion with Mr. M. Syah Indra Aman
88 Review of Coal Operations
98 A Discussion with Mr. Chia Ah Hoo
100 Our Subsidiaries
112 Occupational Health and Safety
116 Environmental Management
122 Exploration and Reserves
131 A Discussion with Mr. Sandiaga S. Uno
132 Investments for Future Performance
143 A Discussion with Mr. Andre J. Mamuaya
www.adaro.com
Adaro Energy Annual Report 2011
3
1
A Snapshot of Adaro Energy I Map of Our Operations
A Snapshot of Adaro Energy
PT Adaro Indonesia (AI)
Coal Contract of Work 100%
1
• Production: 47.7 Mt in 2011
• Product: Sub-bituminous Coal
(“Envirocoal”)
• License: First generation CCoW
valid until 2022
• JORC Compliant Resources and
Reserves 2010 adjusted for coal
mined in 2011:
Resources: 4,373 Mt
Reserves: 891Mt
• Operations: the largest single
site coal mine in the southern
hemisphere, vertically integrated
from pit to port
• Location: South Kalimantan
• Customers: blue-chip power utilities
• Pricing: annual price negotiation and
index-linked
• Cost: low to middle production cost
compared to peers
Adaro Logistics
Adaro Power
PT Saptaindra Sejati (SIS)
Mining and Hauling Contractor (100%)
1
PT Makmur Sejahtera Wisesa (MSW)
2 x 30 MW coal ired mine-mouth power
plant
1
PT Bhimasena Power Indonesia (BPI)
2 x 1,000 MW (34%)
2
PT Sejahtera Alam Energy (SAE)
Geothermal
3
South Kalimantan Power Project
2 x 100 MW (65%)
4
PT Maritim Barito Perkasa
Barging and Shiploading (100% )
1
PT Sarana Daya Mandiri (SDM)
Dredging Barito River mouth and
water toll contractor
2
PT Indonesia Bulk Terminal (IBT)
Coal and fuel Shipping Terminal (100%)
3
PT Servo Meda Sejahtera (SMS)
Coal Hauling Road (35%)
4
4 Adaro Energy Annual Report 2011
4
3
4
3
www.adaro.com
2
2
IndoMet Coal project
25% JV with BHP Billiton
•
•
•
•
3
PT Mustika Indah Permai (MIP)
Coal Lease 75%
• Product: Sub-bituminous Coal
(“Ultima”)
• License: IUP granted in April 2010
for a period of 20 years
• JORC Compliant Resources and
Reserves 2011
Resources: 286 Mt
Reserves: 273 Mt
• Location: South Sumatra
5
2
1
4
2 11
1
Product: Coking Coal
License: Third generation CCoW
Resources: 774 Mt
Location: Central Kalimantan
4
PT Bukit Enim Energi (BEE)
Coal Lease 61.04%
• Product: Sub-bituminous Coal
• License: IUP granted in March 2011
for a period of 20 years
• Further drilling and coal analysis
to support JORC compliant will be
resumed in 2012
• Location: South Sumatra
3
5
PT Bhakti Energi Persada (BEP)
Coal Lease 10.2%
• Product: Sub-bituminous Coal
• Location: East Kalimantan
LEGEND
Alam Tri Abadi
(Coal Mining)
www.adaro.com
Adaro
Power
Adaro
Logistics
Adaro Mining
Services
Adaro Energy Annual Report 2011
5
1
A Snapshot of Adaro Energy | Our Corporate Structure
Our Corporate Structure
Adaro Energy has vertically integrated operations
Alam Tri Abadi
100%
Adaro Indonesia
Mining
license holder
- Thermal Coal
25%
IndoMet Coal project
Mining
license holder
- Coking Coal
75%
Adaro Mining Services
Mustika Indah
Permai
Mining
license holder
- Thermal Coal
61.04% Bukit Enim Energi
100%
Saptaindra
Sejati
Adaro Logistics
100%
Jasapower
Indonesia
Conveyor
System
Mining and
hauling
contractor
100%
Maritim Barito
Perkasa
Barging and
ship loading
51.20% Sarana Daya Mandiri
Dredging Barito River
mouth and water toll
contractor
Mining
license holder
- Thermal Coal
6 Adaro Energy Annual Report 2011
www.adaro.com
from Coal Mining to Power Generation
Adaro Power
Adaro Marketing
100%
Indonesia Bulk
Terminal
Coal storage, blending,
loading terminal and fuel
facility
85%
Indonesia Multi
Purpose Terminal
100%
Coaltrade
Services Intl.
100%
2x30 MW
Mine-mouth Power Plant
Coal export
marketing
34%
35%
Haul Road and Barge
Loading Port
www.adaro.com
Bhimasena Power
Indonesia
IPP 2x1,000 MW
Port Terminal
Servo Meda
Sejahtera
Makmur Sejahtera
Wisesa
65%
2x100MW
Project South
Kalimantan
Adaro Energy Annual Report 2011
7
1
A Snapshot of Adaro Energy | Why Adaro
why
invest in
Adaro Energy
8 Adaro Energy Annual Report 2011
www.adaro.com
because...
1
Supportive Macro Conditions
2
Operational Excellence: Proven Track Record of Organic Growth
3
Large Resources and Reserves of Indonesian Coal with Secure License Structure
4
Focus on Indonesia
5
Approach to Growth and Value Creation
6
Execution of Value Creation Strategy
7
Responsible Corporate Citizen
8
Exceptional Safety Record
9
Financial Strength
10
Total Returns to Shareholders
11
Experienced Management Team and Our People
12
Reputable Shareholders and Our Approach to Governance
www.adaro.com
Adaro Energy Annual Report 2011
9
Supportive Macro
Conditions:
1
Exposure to Expand Emerging
Market and Attractive Thermal
Coal Industry
Coal is used to fuel more than two-thirds of power generation by China and India, who together are expected to
dominate 70% of the Asia Paciic market by 2030. Wood Mackenzie predicts Asia Paciic’s thermal coal demand to
grow at a CAGR of 4% for the foreseeable future and will continue to dominate the seaborne thermal coal trade.
Economic growth in non-OECD Asia countries acts as the main driver for energy demand as much of the increase in
non-OECD Asia’s demand for energy is driven by electricity generation and industrial sectors’ needs (IEO, 2011).
New coal-ired power plants totaling 579 GW are expected in the next 20 years in Asia, predominantly in China, India,
Vietnam and Indonesia. These projects will approximately require an additional 1.7 billion tonnes of coal per year.
Demand for Adaro Indonesia’s Coal Speciication is Expected to Grow Signiicantly
Robust industry fundamentals and outlook
strong demand for low CV coal
120
100
Mt
80
• Asia is expected to make up 76% of total global seaborne trade
in 2021 and contribute 82% of the growth from 2010 to 2021.
60
40
20
• India and China are expected to contribute over 50% of the
growth from 2010 to 2021 and together will take up to 33.5% of
total global seaborne demand, an increase from 23.6% in 2010.
21
20
20
19
20
18
20
17
20
16
20
15
20
14
20
13
20
12
20
11
20
10
20
20
20
09
0
Demand: 4,029 Kcal/kg
Demand: 5,105 Kcal/kg
Coal is a key source of generating electricity in target markets
India
China
Domestic coal consumption for
electricity generation
Source: Wood Mackenzie
10 Adaro Energy Annual Report 2011
Others
12,000
Source: Wood Mackenzie
2029
2027
2025
2028
2030
2024
2022
2020
2018
2016
2014
2012
2011
2010
2,000
0
2008
4,000
500
0
2023
6,000
1500
2021
TWh
8,000
2000
2006
2020
2019
2018
2016
2015
2014
2013
2012
2011
0
2010
20
Natural gas
Hydro
1,000
2004
40
Coal
14,000
2,500
2002
TWh
Mt
60
Gas
16,000
3,000
2000
80
Solid fuels
Hydro
2019
Other
renewable
fuel oil
2017
100
Nuclear
2015
Coal
2013
120
2010
Indonesia
Source: Wood Mackenzie Coal Market Service, Thermal Coal: Trends in
Global Markets, December 2011
www.adaro.com
Operational Excellence:
Proven Track Record of
Organic Growth
2
We recorded our twentieth straight year of uninterrupted annual production
growth from our concession in South Kalimantan, which is the largest
single site mine in the southern hemisphere. We take pride in having grown
production every year despite past economic crisis and dificult weather
conditions. Our operational excellence has assisted us in partnering with
several global blue-chip companies on projects.
In 2011, we increased coal production 13% to 47.7 million tonnes and
overburden removal 32% to 299.9 million bcm from three pits within our
concession; Tutupan, Wara, and Paringin. One of our key growth strategies
is continued focus on organic growth from our current reserve base. We
look to maintain our production track record as we seek organic growth
largely from our E4000 (Wara) coal.
47.7
34.4
20.8
13.6
15.5
22.5
24.3
1.0
1.4
1.0
1.0
2.1
5.4
12.9
1992
1993
1994
1995
1996
299.3
225.9
208.5
159.3
122.8 119.9
85.6
8.6
5.5
40.6 42.2
26.7
17.7
9.4 10.9
2.4
36.1
38.5
30,1
26.8
22.7
24.6
1997
1998
1999
2000
40.4
2001
48.2
56.1
2002
2003
66.0
2004
2005
2006
2007
2008
2009
2010
2011
Wara
Tutupan
Historical Production Volume (Mt)
Paringin
Overburden Removal (Mbcm)
Adaro has amongst
the lowest costs
in the coal mining
industry and
consistently
delivers the highest
EBITDA margin in
Indonesian coal.
www.adaro.com
Our Strategy to Improve Eficiency and Cost Control
Project
Reason
Project Cost
Spend Through
Q411
Completion
Date
Overburden crusher
conveyor
Transport 34 Mbcm overburden
annually
US$ 212 million
US$ 94 million
Q1 2013
Mine-mouth power
plant 2x30 MW
Power operations in South
Kalimantan and our overburden
crusher conveyor
US$ 160 million
US$ 110 million
Q4 2012
Kelanis
Expand our capacity to 70 Mt
from 55 Mt
US$ 55 million
US$ 20 million
Q4 2012
Increase truck size
Improve operating eficiency
and reduces pit congestion
NA
NA
Ongoing
Adaro Energy Annual Report 2011
11
Large Resources and
Reserves of Indonesian
Coal with Secure License
Structure
Adaro has a very large JORC compliant
resource and reserve base of 4.6
billion tonnes and 1.1 billion tonnes,
respectively. At Adaro Indonesia, we
hold a 1st generation Coal Contract
of Work (CCoW), which provides
us greater comfort in the dynamic
regulatory environment of natural
resources. Our CCoW, does not allow
for changes in our contract with the
government and is more secure than
subsequent license types. We pay a
45% tax rate and 13.5% of net sales in
royalty under a CCoW.
Currently, we sell two different
products from our concession in South
Kalimantan, which have heat values of
approximately 5,000 kcal/kg (E5000 Tutupan, Paringin) and 4,000 kcal/kg
(E4000 - Wara). Our coal is marketed
as Envirocoal and is one of the most
environmentally friendly coals with
extremely low ash, nitrogen, and sulfur
content.
Adaro Energy (Equity Adjusted) Consolidated JORC Compliant Coal Resources (*please refer to “Exploration and Reserves” section for the full disclosure)
1
2
3
4
Group
Operating
Company
Total
Adaro
Energy
PT. Adaro
Indonesia1,2
PT. Mustika
Indah Permai3
Calculated Changes
to Adaro Energy’s Coal
Resources 2011 vs 2010
Total
Measured,
Indicated
& Inferred
Coal
Resources
(Mt)
Measured
Coal
Resources
(Mt)
Indicated
Coal
Resources
(Mt)
Inferred
Coal
Resources
(Mt)
Total
Measured,
Indicated
& Inferred
Coal
Resources
(Mt)
Measured
Coal
Resources
(Mt)
Indicated
Coal
Resources
(Mt)
Inferred
Coal
Resources
(Mt)
Total
Measured,
Indicated &
Inferred Coal
Resources
2011 vs
2010 (Mt)
Total
Measured,
Indicated &
Inferred Coal
Resources
2011 vs
2010 (%)
4,588
1,651
1,437
1,499
4,426
1,517
1,410
1,499
162
3.7%
Based on Adaro Indonesia’s 2010 JORC Coal Resource and Reserve Statement adjusted by subtracting 53 Mt of in-situ coal removed by mining during 2011
1 Mt of in-situ coal was removed from North Paringin by mining in 2011
Based on the JORC Report of PT. Mustika Indah Permai (MIP) dated January 2012
Small differences between 2010 Resource tonnages in this table and those stated in the 2010 Adaro Energy Annual Report based on cumulative rounding errors
Adaro Energy (Equity Adjusted) Consolidated JORC Compliant Coal Reserves (*please refer to “Exploration and Reserves” section for the full disclosure)
As at December 31 20104
Calculated as at December 31 2011
Using A djusted 2011 Mine Production
& the December 2010 PT Adaro Indonesia
JORC Statement
1
2
3
4
Group
Operating
Company
Total
Adaro
Energy
Coal
Reserves
PT. Adaro
Indonesia1,2
PT. Mustika
Indah Permai3
Total
Proved &
Probable
Coal
Reserves
(Mt)
1,095
Probable
Proved
Coal Reserves Coal
Reserves
(Mt)
(Mt)
830
Calculated Changes to Adaro
Energy’s Coal Reserves
2011 vs 2010
Total
Proved &
Probable
Coal
Reserves
(Mt)
Proved
Coal
Reserves
(Mt)
Probable
Coal
Reserves
(Mt)
938
699
239
265
Total
Measured,
Indicated &
Inferred Coal
Reserves
2011 vs 2010
(Mt)
Total
Measured,
Indicated &
Inferred Coal
Reserves
2011 vs 2010
(%)
157
16.8%
Based on Adaro Indonesia’s 2010 JORC Coal Resource and Reserve Statement adjusted by subtracting 47 Mt of coal produced during 2011
No JORC Coal Reserves were declared for North Paringin in 2010 however 1 Mt of coal was mined in 2011
Based on the JORC Report of PT. Mustika Indah Permai (MIP) dated January 2012
Small differences between 2010 Reserve tonnages in this table and those stated in the 2010 Adaro Energy Annual Report based on cumulative rounding errors
20
30
15
Nitrogen % (daf)
ASH % (adb)
As at December 31 20104
Calculated as at December 31 2011
Using Adjusted 2011 Mine Production & the
December 2010 PT Adaro Indonesia JORC
Statement
10
5
envirocoal
30
2.5
2.0
1.5
1.0
envirocoal
0.5
0.0
Total Sulfur % (adb)
3
2.5
2.0
1.5
1.0
0.5
0.0
envirocoal
0
1% - 2.5%
0.9%
0.1%
Ash Content (Adb)
Nitrogen Content (Daf)
Sulphur Content (Adb)
• Lowest ash content among
coals produced for global export
trade, providing consumers with
signiicant cost savings
• Blending Envirocoal with higher
ash coal reduces the on-costs
associated with ash disposal
• Reduces deposition rates in boilers
improving thermal eficiency and
reducing maintenance costs
• Envirocoal is amongst the 10
lowest coals by nitrogen content
• Enables consumers to reduce the
costs associated with removing
nitrous oxides from the flue gases
• Results in more net power for sale
and lower electricity production
cost
12 Adaro Energy Annual Report 2011
• Regulation of emissions of
sulphur oxides has required some
consumers to install flue gas
desulphurization equipment or to
reduce the sulphur content in the
blend of coals.
• Envirocoal’s ultra low sulphur
content enables consumers to meet
regulated standards and delay
capital expenditure, reducing the
cost of plant operation.
• Desulphurization units can cost
up to 20% of the total capital
expenditure of a new power station
www.adaro.com
4
Focus on Indonesia
Resources: 75.03 Bt
Reserves: 13.22 Bt
Resources: 85.25 Bt
Reserves: 14.80 Bt
Indonesia is now recognized as an emerging market leader, with
2011 GDP growth of 6.54%. Furthermore, Indonesia is resource
rich and enjoys close proximity to those other emerging nations,
namely China, India and South Korea. Indonesia is the world’s
largest exporter of coal and the country’s coal production capacity
is estimated to reach 500 million tonnes by 2020, of which 50% is
low-rank coal (Wood Mackenzie, 2008).
Indonesian Coal
Resources: 160.65 (Bt)
Reserves: 28.02 (Bt)
7.8%
1.4%
24.1%
66.6%
www.adaro.com
Low Rank
Medium Rank
High Rank
Very High Rank
The rising demand for coal-ired power generation is also expected
to drive production growth of Indonesian low-rank coal. Much
like reforms to regulation, challenges exist. Growth targets for
installation of new generation capacity have slipped, so an objective
view should be taken when considering the numbers. Despite this,
PLN and private industry projects are under construction and coal
ired generation capacity is reported to double between 2011 and
2019 to 31.2GW.
With our performance in 2011 we moved one step closer to
achieving our vision to be a leading Indonesian energy and mining
company. We are proudly Indonesian and our focus is Indonesia.
Adaro Energy Annual Report 2011
13
5
Approach to Growth
and Value Creation
Action Plan
Growth Strategy
Organic growth from current
reserve base
Production ramp up and mine
planning
Majority of organic growth will
come from Wara mine
Focus on improving eficiency
of coal supply chain and cost
control
Implementation of OPCC,
mine-mouth power plant and
control of barge cycle time
Chip sealing of hauling road,
dredging of channel etc
have been initiatives in past
that brought down costs
substantially
Increase reserves, diversify
product, locations and
licenses
Acquisition of large coal
deposits at different locations
in Kalimantan and Sumatra
islands
Acquired concessions in
South Sumatra, more in due
diligence. Partnering with
BHP on Coking Coal
Investment into IPPs
First Indonesian company
to participate in IPPs in a
signiicant way. Partnering
with reputable global players
in IPP sector
Continue to deepen
integration
Adaro Energy continues to focus on creating maximum sustainable value from Indonesia coal.
However, our strategy has shifted from not only developing a single site concession in South
Kalimantan, but also incorporating acquisitions of coal deposits in Indonesia into our growth plan
to reach 80 million tonnes of production in the medium term.
We will continue to develop infrastructure and improve our coal supply chain to realize eficiencies
and strengthen our distinctive position in the market. Moreover, we have further integrated our
coal supply chain by moving downstream into power.
Our approach to value creation can be summarized by four key strategies; organic growth from the
current reserve base, improving the eficiency of our coal supply chain, increasing and diversifying
reserves, products and locations and deepening integration.
14 Adaro Energy Annual Report 2011
www.adaro.com
Execution of
Value Creation
Strategy
6
We are executing on our value creation strategy. We have made investments in a number
of infrastructure development projects that are on track and progressing well, further
improving eficiency and lowering costs. We also acquired interests in two coal deposits
and one logistic company in South Sumatra to diversify our operations and increase
reserves.
We deepened integration by moving further downstream into power and establishing the
JPower-Adaro-Itochu consortium to build a 2,000 MW coal-ired power station in Central
Java, which will be one of the largest in Asia.
Acquisition
Price/ Ownership Date
Location
Asset
License /
Expiry
Expected
Operation
IndoMet Coal (IMC)
JV with BHP
US$335m
25%
March
2010
Central
Kalimantan
Greenield coking coal
CCoW
NA
TBA
Mustika Indah Permai
(MIP)
US$222.5m
75%
August
2011
South Sumatra
Greenield thermal coal
IUP
2030
2012
Bukit Enim Energi
(BEE)
US$67m
61%
October
2011
South Sumatra
Greenield thermal coal
IUP
2031
TBA
Servo Meda Sejahtera US$22m
(SMS)
35%
October
2011
South Sumatra
Logistics - haul
road and port
NA
2012
Bhakti Energi Persada US$66m
(BEP)
10%
June
2011
East Kalimantan
Greenield thermal coal
IUP
NA
TBA
www.adaro.com
Adaro Energy Annual Report 2011
15
7
Responsible Corporate
Citizen
By championing the principles of mutual respect, partnership,
long-term and sustainable commitment, Adaro’s Corporate
Social Responsibility (CSR) programs encompass four key
areas, economic development, educational enhancement, health
improvement, and social cultural promotion.
The aim is to support the enhancement of community welfare that
will ultimately lead to the creation of sustainable and independent
•
•
Record contribution to nation
with corporate income tax of
US$450.5 million and royalties of
US$405.4 million
We increased community
development spending by 70%
to US$10 million
16 Adaro Energy Annual Report 2011
post-mine communities.
We also attempt to preserve the environment, create a productive
community and be a good local partner through all our programs.
In 2011, Adaro Energy and its subsidiaries allocated Rp91 billion
(~US$10 million) for these programs.
www.adaro.com
Exceptional
Safety Record
and Training
8
Adaro Energy is committed to maximizing workplace
safety in all its operations to achieve its vision of being a
leading Indonesian mining and energy group. We strive to
create a safe working environment so that our employees
can go home safe and healthy at the end of each day.
We require our employees and contractors to have the
knowledge, skills and desire to comply with national and
international standards of occupational health and safety
to minimize risk of accidents and injuries occurring from
operations. We also have a number of initiatives to help
achieve our goals of eliminating work place accidents.
Production
vs Injury
2007 - 2011
47.7
42.2
36.1
0.69
38.5
40.6
0.65
0.50
0.36
0.38
PRODUCTION (mt)
LTIFR
2007
www.adaro.com
2008
2009
2010
2011
Adaro Energy Annual Report 2011
17
Financial Strength:
9
Good Access to Capital, Healthy
Balance Sheet, Robust Proitability
and Strong Cash Generation
Net Sales (in US$ mn)
& Operating Margin
1,306
1,869
EBITDA (in US$ mn)
& Net Debt to EBITDA
2,591
2,718
36.7%
18.9%
19.3%
2007
2008
2.26x
32.2%
26.2%
2009
225
3,987
352
2010
960
1,067
1.33x
0.45x
2007
2011
Free Cash Flow (in US$ mn)
& Cash from Operations to Capex
154
506
638
2008
2009
41
847
96
6.6x
417
1.2x
1.1x
2010
2011
0.5x
2009
1.05x
2010
2011
• US$400 million 7 year,
concluded with 12
banks. Undrawn $100
million.
247
32.5%
2007
2008
2009
94%
2010
97%
60%
21%
21
8%
40
36
100
2012
1
5
3
49%
15
54%
800
230
4
34
5
32
45
4
552
36.9%
• US$750 million 10 year
bank loans club deals
with key relationship
banks. Undrawn $600
million.
43
100
100
87.5
38
56
2013
2014
2015
2016
2011
100%
2019 Bond
Amortizing
RCF
USD Syndicated Loan
Facility
Finance
Leases
New 10yr US$ Term
Loan
USD Senior Credit Facility
(SIS)
OCBC NISP Tbk Facility
(SDM)
45%
19
150
• US$800 million 10 year,
non call 5, Reg S/144A,
Guaranteed Senior
Notes Currently rated
at Ba1 and BB+ from
Moody’s and Fitch.
17.2%
Debt Maturity Proile in 2012
38%
24
1,472
1.16x
41.2%
27.1%
2008
883
Net income (in US$ mn)
& EBITDA Margin
4.6x
2007
Exceptional
Access to Capital
Cumulative % of Total
Debt
35
71
94
2017
2018
2019
60
68
2020
2021
A large group of relationship banks and bond holders continue to be very supportive of Adaro.
At end of December 2011, Adaro Energy had approximately $700 million undrawn facilities
Key Lenders to the Group
18 Adaro Energy Annual Report 2011
www.adaro.com
Total Returns to
Shareholders
10
210.9%
202.7%
193.7%
68.1%
Jakmine
Index
283.0%
Adaro
JCI
Index
ICB Subsector
(Coal)
Bloomberg
Asia Pac
Mining
Over the last three years, Adaro has returned
signiicant shareholders return for those
investors who have held our stock during
this time frame. As mining is not a short-term
business, our focus is to create long-term value
for all of our shareholders who support us as
we seek to create maximum sustainable value
from Indonesian coal. Adaro will consistently
pay a cash dividend each year; however, our
main use of cash will be to invest in the growth
of our business.
3-year Stock Performance
Security
Price Appreciation
Total Return
CAGR
ADRO IJ Equity
264.95%
282.95%
56.45%
JCI Index
181.98%
202.73%
44.66%
JAKMINE Index
188.53%
210.88%
45.95%
ICB Subsector (Coal)
167.49%
193.65%
43.20%
Bloomberg Asia Pac Mining
58.49%
68.13%
18.91%
Fiscal Year
Dividend Payout Ratio
Dividend Per Share (IDR)
Dividend Yield*
2010
43.98%
30.35
1.47%
2009
21.24%
29.00
2.41%
2008
42.54%
11.80
1.12%
Adaro Energy’s Dividend
* Dividend yield is calculated by dividing dividend per share by average stock price for associated iscal year
Source: Bloomberg and Company estimates
www.adaro.com
Adaro Energy Annual Report 2011
19
11
Experienced
Management Team
and Our People
Leadership continuity is key to successful execution
of Adaro Energy’s strategy and navigating through
challenging times
Experienced Management
Team with Proven Track
Record
Production (Mt)
79%
Sales (US$ mn)
482%
47.7
3,987
26.7
2005*
2011
Proit Before Tax (US$ mn)
More than
135 years
of combined
industry
experience
697
2005*
Net Debt/EBITDA
6.3x
1094%
(83)%
1,003
84
2005*
2011
2011
Combined 75
years with Adaro
Energy
Mine Life (Years)
1.0x
2005*
2011
Lost Time Injury Frequency Rate
11%
1.32
(68)%
18.7
16.9
Average 12
years with Adaro
Energy
2005*
2011
0.42
2005*
2011
* Represents PT Adaro Indonesia only
•
•
•
•
Beneits from experience and active participation of key shareholders
High operating and safety standards
Prudent inancial policies
Strong corporate governance and regulatory compliance
20 Adaro Energy Annual Report 2011
www.adaro.com
Reputable Shareholders
and Our Approach to
Governance
12
Reputable and Supportive
Shareholders
Edwin Soeryadjaya
Teddy Rachmat
Boy Garibaldi Thohir
Benny Subianto
Sandiaga Uno
} 63%
together hold
Strong Corporate Governance Structure
In-line with International Best Practices
•
•
•
•
1/3 of Board of Commissioners are independent commissioners
Audit Committee consists of 3 independent members
Conduct regular internal audit of operations
Disclosure meets or exceeds with international standards
Wide Recognition Across
the Board
•
•
•
•
•
•
•
www.adaro.com
Top Performing Listed Companies 2010 by Investor Magazine
International Coal Producer of the Year by McCloskey
3rd Fastest Growing Company in Asia by Platts
One of highest tax payers on Jakarta Stock Exchange in 2008
and 2009
PROPER Green Award for the 3rd consecutive time from Ministry
of Environment
Only coal company to ever receive the PROPER Green Award
Best CEO in Mining 2010 by Ministry of Energy and Mineral
Resources
Adaro Energy Annual Report 2011
21
1
A Snapshot of Adaro Energy
Share price (Rp)
2011 Important Dates and Share Price Information
3,000
2,675
2,500
1
4
2
1
3
2,000
4
5
Adaro Energy
HSBC Global Mining Index
Bloomberg Coal Index
1,500
BBG World Coal Index
Jakarta Mining Index
1,000
500
0
Jan
Feb
Mar
Apr
Jun
Q2
Q1
1
May
2
3
February 18th 2011
March 5th 2011
April 20th 2011
PT Saptaindra Sejati (SIS) refinanced its existing
2008 US$300 million five-year loan with a
US$400 million seven-year syndicated bank loan.
Adaro Energy on the Forbes Global 2000 list at
#1,527.
Adaro held its Annual General Meeting of
Shareholders (AGMS) and Extraordinary General
Meeting of Shareholders (EGMS) and distributed
its final dividend payment constituting 43.98% of
2010 Net Income, or amounting Rp970.77 billion.
7
September 30th 2011
8
October 6th 2011
The JPower-Adaro-Itochu Consortium received
We received Aditama (gold) award 2011 for
Letter of Intent (LoI) to construct a 2,000MW coalenvironmental management excellence in coal
sector from the Director General Mineral and Coal, fired power plant in Central Java province.
Mr. Thamrin Sihite.
22 Adaro Energy Annual Report 2011
9
October 10th 2011
PT Alam Tri Abadi (ATA), a wholly owned
subsidiary of PT Adaro Energy, signed a deed of
transfer shares to acquire a 35% interest in PT
Servo Meda Sejahtera (SMS) for Rp200 billion
from PT Servo Infrastruktur (SI).
www.adaro.com
Jul
2011 Important Dates and Share Price Information
Bumi, Adaro to help Indonesia Coal Output Rise 71% , WoodMac Says
2
Adaro to Buy Majority Stake in Bhakti Energi Persada This Year
3
Indonesia May Increase Coal Production 8,3 Percent in 2012
4
Adaro Indonesia Gets 10 Years, $750 Million Bank - Loan Agreement
5
Adaro, Bumi Advance as a UBS Forecasts China Coal Imports to Rise
5
6
11
9 10
300,000
10
250,000
0
200,000
-10
150,000
-20
12
8
2
Return (%)
1
Volume (000)
Most Read Adaro News on Bloomberg:
1,770
100,000
-30
50,000
-40
1000
-50
7
3
0
Aug
Sep
Oct
Q3
Nov
Q4
5
4
Dec
6
May 31st 2011
July 4th 2011
August 19th 2011
Adaro, Komatsu and United Tractors launched Bio
Diesel Fuel Pilot project in Indonesia to achieve
sustainable environmentally friendly mining
operations in our mining operations.
PT Adaro Indonesia closed a US$750 million 10year unsecured loan facility from our relationship
banks, after previously receiving US$1 billion
commitment for this 10-year bank loan.
PT Alam Tri Abadi (ATA), a wholly owned
subsidiary of PT Adaro Energy, signed a share
purchase agreement to acquire a 75% stake of
PT Mustika Indah Permai (MIP) for US$222.5
million (post tax US$ 234.2 million) from Elite Rich
Investment Limited.
10
11
12
October 14th 2011
November 30th 2011
December 9th 2011
PT Alam Tri Abadi (ATA), a wholly owned
subsidiary of PT Adaro Energy, signed a deed of
transfer shares to acquire 46% interest in PT Bukit
Enim Energi (BEE) for US$46 million from Lucky
Star Corporation, Oriental Holdings Ltd., and
BrightPath Corporation. The group owns 61.04%
of BEE.
We received PROPER Award with Green Rating
for the fourth consecutive year from the Ministry
of Environment of Republic Indonesia, Prof. Dr.
Balthasar Kambuaya.
We delivered our first shipment of E4000 (Wara)
coal to Hong Kong Electric Company Limited
(HKE), HK.
www.adaro.com
Adaro Energy Annual Report 2011
23
1
A Snapshot of Adaro Energy | Map of Our Operations
Map of Existing Operations
2
4
3
1
5
6
7
24 Adaro Energy Annual Report 2011
8
www.Adaro.com
www.adaro.com
1
PT Adaro Indonesia,
Mining
2
PT Saptaindra Sejati (“SIS”),
Contract Mining
Production Volume:
47.7 million tonnes (13% increase y-o-y)
Coal Sales including from Coaltrade:
50.8 million tonnes (16% increase y-o-y)
Overburden Removal:
299.27 Mbcm (32% increase y-o-y)
Planned Strip Ratio: 5.9x (2010: 5.5x)
Coal type: Envirocoal, sub-bituminous,
medium caloriic value, ultra-low
pollutants
3
Hauling Road:
100% Owned by Adaro Indonesia
Total Coal Production:
22.7 million tonnes (37% increase y-o-y)
Total Overburden Removal:
167.5 Mbcm (31% increase y-o-y)
4
Kelanis: One of the World’s
Largest Inland River Bulk Terminals
Hauling Equipment Capacity:
60 million tonnes a year
Hauling Road Capacity:
80 million tonnes a year
Hauling Road Distance:
80 kilometers
Vehicles: 200 road trains
FY11 Contractors:
PAMA 35%, SIS 32%, BUMA 18%,
RAJ 13%, Adaro Indonesia 2%
5
PT Maritim Barito Perkasa (“MBP”)
Barging
Crushing Capacity:
in excess of 50 million tonnes a year
- 7 crushers with total capacity of 7,500
tonnes per hour
Stockpiling Capacity:
2 stockpiles with capacity of 250,000 tonnes
each
Barge Loading Capacity:
2 load out conveyor systems each rated at
5,000 tonnes per hour
Crushing, stockpiling and barge
loading facilities at Kelanis can easily
be upgraded
6
PT Maritim Barito Perkasa (“MBP”)
Shiploading
8
Total Coal Loaded:
13.6 million tonnes
(8% increase y-o-y)
Total Dedicated Capacity:
60,000 tonnes per day
MBP Floating Cranes:
4, each with 15,000 tonnes per day
capacity
PT Indonesia Bulk Terminal (“IBT”)
Coal Terminal Services
Total Coal shipped:
4.4 million tonnes (30% decrease y-o-y)
Number of vessels loaded: 65
Stockpile:
Up to 800,000 tonnes of coal
Capacity:
12 million tonnes coal per year, fuel tank
capacity of 80,000 kilolitres
Facilities:
2 large berths for 2 barges of up to
15,000 tonnes
Coaltrade
Services
International
Pte Ltd
Marketing
www.Adaro.com
Sea Channel Operator
Total Transit Volume: 79 million tonnes
Capacity:
200 million tonnes per year (previously 60
million tonnes per year)
Total barge steaming time along the
channel: reduced by 3 hours
Channel Speciications:
Length: 15,000 meters (old: 14,000 meters)
Base width: 138 meters (old: 60 meters)
Depth: 6 meters LSW (old: 3 meters LSW)
Total Coal Barged:
15.8 million tonnes
(36% increase y-o-y)
Barging Distance:
250 kilometers (estimated travel time
–24 hours)
MBP/HBI Fleet:
24 barges and 25 tugboats
Self-propelled Barges:
Four units of self-propelled barges with
capacity of 12,000 dwt - 15,000 dwt
7
PT Sarana Daya Mandiri (“SDM”)
Principal activities are trading of thermal coal,
acting as agents for both coal producers and
customers.
Total third party coal sales of 3.6 million tonnes.
Adaro Energy Annual Report 2011
25
2
From Us to You | Letter from the Board of Commissioners
Edwin Soeryadjaya
President Commissioner
Dear Shareholders,
Adaro Energy achieved a historical milestone in
2011 as we reached 20 years of uninterrupted
production growth and record inancial results
in the midst of a challenging global situation. We
are continuously striving to grow and diversify our
products and operations and are further enhancing
our coal supply chain downstream into the power
sector, enabling us to reach our overall long term
goal of creating maximum sustainable value from
Indonesian coal by building a bigger and better
Adaro.
Year End Results
Letter From the
Board of Commissioners
“
As a publicly listed mining and
energy company, good corporate
governance goes hand-in-hand with
our Corporate Social Responsibility
(CSR). Our commitment to support
the local communities and preserve
the environment, in which we operate,
has been demonstrated in the past
and continues to deine our business
practices.
26 Adaro Energy Annual Report 2011
We are pleased with our strong 2011 operational
and inancial performance. Our achievements
were possible due to normal weather conditions
throughout the year, the arrival of new and larger
sized heavy equipment and quality performance by
our mining contractors. We produced 47.7 million
tonnes of coal and had sales volumes of 50.8
million tonnes, increasing year over year by 13%
and 16%, respectively. Due to higher mining costs,
resulting from a higher stripping ratio and longer
overburden hauling distances, Adaro Energy’s
costs of revenue increased 35% to US$2.56 billion.
However, we sustained a robust EBITDA (earning
before interest taxes depreciation and amortization)
of US$1.47 billion, increasing 66.7% from last
year, and amongst the best EBITDA margins in
Indonesian coal of 37%.
Adaro is currently Indonesia’s second largest
thermal coal producer in terms of tonnage, operates
the largest single coal mine-site in Indonesia, and is
a signiicant supplier of thermal coal to the global
seaborne market. Adaro is vertically integrated,
either directly or indirectly, and controls all aspects
of its business from exploration to marketing. With
a present production of approximately 48 million
tonnes per year, we are executing plans to boost
production to 80 million tonnes per year in the
medium term. Adaro has approximately 4.6 billion
tonnes of coal resources and 1.1 billion tonnes
of reserves based on JORC studies completed in
www.adaro.com
2011 and 2012 adjusted by 2011 Adaro Indonesia
coal production.
Our operations at Adaro Indonesia’s Wara pit will
be the key organic growth driver in order to achieve
our medium term production goal. In 2011, E4000
(Wara) contributed 5.4 million tonnes to total
production. Going forward, we expect production
at Wara will increase supported by strong demand
from developing Asia.
Projects and Business Development
Progress
We continue to develop infrastructure and improve
our coal supply chain to realize eficiencies and
strengthen our distinctive position in the market.
Moreover, we have further integrated our coal
supply chain by moving downstream into power
as well as diversifying our product offerings and
increasing our reserve base through acquisitions of
coal deposits in Indonesia.
2x30 MW Coal-ired Mine-mouth Power Plant
Adaro Energy’s 2x30 MW coal-ired mine-mouth
power plant aims to reduce our dependency on
oil by powering our overburden crushing and
conveying system, which will reduce overburden
truck hauling, in addition to providing power to
other parts of our mining operations. The plant
is owned and will be operated by our subsidiary,
PT Makmur Sejahtera Wisesa (MSW), with a total
estimated cost of US$160 million. At year end
2011, the total spending on this project reached
US$111.8 million. The plant will be fuelled by
approximately 300,000 tonnes of E4000 coal per
year. The physical progress of the plant is on track
and is expected to be in full operation in late 2012.
Overburden Crushing and Conveying System
The out of pit overburden crushing and conveying
system is currently being installed. The system will
reduce the cost of transporting the overburden
material to the dump location, decreasing
dependency on the use of diesel. It has a capacity
to crush and transport 12,000 tonnes per hour of
overburden material equivalent to approximately
34 million bank cubic meters (Mbcm) annually. The
project is projected to cost in excess of US$212
million with an expected reduction in operating
costs by US$1.00-US$1.20 per bcm compared to
the existing use of trucking. The total spending at
year end 2011 was US$94.7 million and the project
is expected to commence commercial operation in
2013.
www.adaro.com
Expanding Capacity at Kelanis River Terminal
Our coal crushing, stockpiling and barge loading
facilities are located at the Kelanis river terminal
with a capacity of 55 million tonnes per year. The
upgrade of the existing Kelanis facilities to more
than 70 million tonnes per year by the end of
2012 is underway and progressing well. The total
estimated cost for this project is US$55 million.
Our plan includes upgrading and replacing existing
hoppers, upgrading existing as well as adding new
conveyor belts, and adding two new barge loading
conveyors.
IndoMet Coal project with BHP Billiton
Further studies to identify development options
across the seven Coal Contracts of Work (CCoWs)
of the IndoMet Coal (IMC) project continued
towards the end of 2011. In the IndoMet Coal
project, Adaro has an interest of 25% and the
remaining 75% is owned by BHP Billiton. Adaro is
delighted to have this project together with BHP
Billiton, a global leader in the resources industry
and the world’s largest coking coal producer, in
developing this world class asset, which we expect
will create signiicant shareholder value.
JPower-Adaro-Itochu Consortium Signed a
PPA for a 2,000 MW Central Java Power Plant
Project
In early October, PT Bhimasena Power Indonesia
(BPI), a company established by the JPowerAdaro-Itochu consortium, signed a Power
Purchase Agreement (PPA) with PT PLN (Persero)
for the 2,000 MW Central Java Power Plant (CJPP)
project with a total project cost of approximately
US$4 billion. The PPA includes the construction of
the power plant and a 25-year supply of electricity
to PLN. The Government of the Republic of
Indonesia (represented by the Ministry of Finance),
Indonesia Infrastructure Guarantee Fund (IIGF) and
BPI also will guarantee PLN’s payment obligation
for the CJPP project under the PPA. This is the
irst formalized public-private partnership (PPP) in
Indonesia under a guarantee provided by the IIGF
and part of the Master Plan for Acceleration and
Expansion of Indonesian Economic Development.
This power plant is the irst in Indonesia to use
advanced environmentally friendly, technology
and will serve as a model of high-eficiency power
generation. The power plant will utilize Indonesian
sub-bituminous coal as fuel, with Adaro Indonesia
as the primary coal supplier. The construction is
expected to commence in 2012 with commercial
operations by 2016-2017.
Adaro Energy Annual Report 2011
27
2
From Us to You | Letter from the Board of Commissioners
In moving downstream to the power sector,
we have reviewed several Independent Power
Producer (IPP) projects located in Indonesia and
will continue to do so.
Acquisitions of Coal Mines and Logistics
Company in South Sumatra
As part of our efforts to increase our reserves, Adaro
Energy continues to look for potential acquisitions
of coal deposits in Indonesia employing three
selection criteria namely size, location, and quality.
In 2011, we acquired two greenield coal projects in
South Sumatra and one logistics company. In midAugust, we purchased a 75% stake in PT Mustika
Indah Permai (MIP) for US$222.5 million (post tax
US$234.2 million). MIP holds an IUP permit which
was granted in April 2010 for a period of twenty
years and covers an area of approximately 2,000
hectares. As of December 15th, 2011, the total
JORC Compliant Coal Resources for MIP were
286 million tonnes, of which 273 million tonnes are
JORC Compliant Coal Reserves with an average
caloriic value of 4,281 kcal/kg (GAR).
In early October, Adaro acquired a 35% interest
in PT Servo Meda Sejahtera (SMS) for Rp200
billion. We carried out this transaction to support
and develop our coal logistics operations in the
South Sumatra Province. SMS is constructing a
dedicated haul road and common user coal port,
which will provide coal hauling and barge loading
services in South Sumatra.
In mid-October, Adaro Energy bought an additional
46% stake for US$46 million to become the
majority shareholder in PT Bukit Enim Energi (BEE)
with a 61.04% stake in total. BEE is a coal mining
company developing a greenield coal project in
South Sumatra. BEE holds an IUP permit which was
granted in March 2011 for a period of twenty years
which covers an area of 11,130 hectares. Marston,
an international mining consultant, carried out
engineering studies of the coal potential of the MIP
and BEE mines, on which the valuation was based.
Additional drilling and coal analysis are required
before a JORC compliant statement of Resources
and Reserves can be issued for BEE in 2013.
These acquisitions are part of Adaro’s strategic plan
to continuously grow and develop both organically
and inorganically, creating maximum value from
Indonesian coal.
28 Adaro Energy Annual Report 2011
Corporate Social Responsibillity And
Community Development
As a publicly listed mining and energy company,
good corporate governance goes hand-in-hand
with our Corporate Social Responsibility (CSR). Our
commitment to support the local communities and
preserve the environment, in which we operate,
has been demonstrated in the past and continues
to deine our business practices.
Our CSR programs have become embedded
in every activity we do, particularly in our mine
site. In addition, Adaro employs the Millenium
Development Goals as guidance in implementing
our community development programs. We realize
that we must not only bring temporary beneits to
our surroundings but also sustainable beneits that
contribute to the establishment of an independent
society based on a harmonic relationship with the
natural environment. In fact, we are in the process
of developing a mining closure model to ensure we
achieve sustainable community development.
Aside from our extensive community programs,
Adaro applies strict standards on all phases of its
operations through an Environmental Policy and
Master Plan to ensure that negative impacts are
minimized. Land affected by mining is reclaimed
beyond what is required by the regulations. The
reclamation encompasses planting of commercial
crops, creating ish and shrimp farms, and
developing other usages. We continuously monitor
air and water quality as well as implement strict
programs for air, water and waste handling.
Our efforts and commitment in applying best
environmental practices have earned us
recognitions. We are delighted to have received
the PROPER Green award for four consecutive
years from the Ministry of Environment for social
programs and environmental rehabilitation. In
addition, we received a total of nine awards for
our CSR programs in community health, education
and economic development from the Ministry of
Social Affairs, the Coordinating Ministry of People’s
Welfare and Enterprise Asia.
Corporate Governance and Compliance
We meet the various requirements of the capital
market and exchange regulatory authorities;
however, we still continuously seek to improve and
develop our corporate governance structure in-line
with best practices.
www.adaro.com
The Board of Commissioners oversees all major
aspects of the management of Adaro through
routine and ad-hoc board meetings, as well as
the activities of the Audit Committee. We have
made great progress aligning our best practices
and standards with the goals, mission and vision
of Adaro Energy; yet, we strive to continuously
improve our corporate governance. Our efforts
and commitment have gained recognition as we
achieved several awards from both international
and domestic institutions. We received an award
from Corporate Governance Asia, an international
institution, while domestically we received an
award for the Most Improved Governance from
the Indonesian Institute for Corporate Directorship
(IICD) and an award as Indonesia Trusted
Companies based on Investor and Analysts’
Assessment Survey from the Indonesian Institute
for Corporate Governance (IICG).
We believe that strong corporate governance is not
only a set of procedures and policies to comply
with the regulations, but also applies to corporate
governance of all our activities and businesses and
is a perpetual system that ensures the interests of
stakeholders and the sustainability of the company.
Dividend Distributions
The 2011 Annual General Meeting of Shareholders,
which was conducted on April 20th, 2011, approved
the use of 43.98% net proit for the iscal year 2010
inal dividend payment